BUS 421 Study Guide - Final Guide: Credit Risk

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 421
• Professor: Jamal Nazari

Document Summary

If management must report a loss, might as well write a big one. management takes a big bath by writing off its assets and clearing the deck. since accruals will reverse this enhances the probability of future reported profits. Similar to taking a bath but less extreme. taken by a politically visible firm during high profitability periods, or when a firm is seeking legislation to protect themselves from foreign competition. Income maximization - bonus purposes, as long as it"s not above the cap. firms close to debt covenant violations may also partake in this. Expectations management can realistically be achieved or delivered. usually done by managers through creating communications channels with the public or analysts. Altering operating decisions to affect cash flows. Deal with using flexibility in accounting standards to alter earning.